Context Corporation reported shareholders equity on December

Context Corporation reported shareholders’ equity on December 31, 20X3:

Common stock - $10 par value; 50,000 shares authorized
20,000 shares issued and outstanding....................... $200,000
Paid-in capital in excess of par value, common stock....... $30,000
Retained earnings...........................................$135,000

Dec. 31, Context Corporation\'s statement of equity looked like this:

253250

Provide a rationale between 200 and 300 words in length for buying. or not buying this stock based on the financial information presented above: Based on Earning per share, Price-Earning Ratio, Dividend Yield, Book Value per share.

Solution

earning per share= profits available to equity shareholders/ no of share outstanding

194000/(20000-1250)=10.35

price earning ratio=share price at market values / earning per ratio=20/10.35=$1.93

if price earning ratio is higher it shows the higher earning growth in the future compared to companies with a lower price earnings ratio.

DIVIDEN YIELD:-annual dividends per share/ price of a share

annual dividends per share =73500/18750=3.92

price of a share=20

dividend yield=3.92/20=19.6%

if this percentage is higher it would be beneicial for those investors who seeks regular and continuous flow of dividends but at the same time it would minimize the growth of dividends.

book value per share=total shareholder equity/ total outstanding no of shares

=458250/18750=24.44